There are only two categories here: service and product.
The Cost of the Product -The Money Loaned
The Cost of the Services
The cost of money, as with the cost of meat, is a direct, one-to-one relationship: the more meat you buy, the more money you pay. Likewise, the more money you borrow, the more interest you pay. The price per pound (or dollar) does not change, only the total cost, based upon how much product you purchase. A service, on the other hand, is a bit more difﬁcult to quantify. The best way to illustrate this is with an example. Let’s go back to our $100,000 mortgage. If a one percent origination fee is charged, the borrower will pay $1,000 in exchange for the bank arranging an investor, and the loan ofﬁcer taking the application and processing the paperwork. On a $200,000 loan, the same one percent doubles the commission to $2,000. Yet, the amount of paperwork, time, and effort involved on behalf of the bank and the loan ofﬁcer will not have changed at all. It’s basically a matter of erasing the “1” and ﬁlling in a “2” then collecting an extra grand for the trouble! The point I’m trying to make is that you should not judge the fairness of service fees by the amount of the loan. Instead, you should negotiate based upon the level of service required and expected, which brings us to the next step in the process.
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